How much of my paycheck should i put into a 401k?
How much of my paycheck should i put into a 401k?
Im 16 and am employed. My employer sent me info and forms for a 401k. My question is what percent of my paycheck should i put into the 401k.
Answers:
Chosen Answer
Robert Alleman: Its a great thing to start saving when you are young, but the big question here is does your employer match? If your employer matches funds, then put enough of a percentage to get all of his match. However, if he does not match, because of your age, you may be better off with a Roth IRA. Unless you are a very highly paid 16 yr. old, you may not pay much in taxes. Thats the big benefit of the 401k or IRA. You get to contribute pre-tax income (you aren't taxed on that money) But, if your situation means that you get all of your withholdings back anyway, then you would be better off putting in the Roth. That way, when you take it out, you will owe no taxes on distributions. With the 401K, you would have to pay taxes on the distributions as well as a penalty for early withdrawal, if you don't keep it in until 59
2011-03-16 14:38:15
Robert Alleman: Its a great thing to start saving when you are young, but the big question here is does your employer match? If your employer matches funds, then put enough of a percentage to get all of his match. However, if he does not match, because of your age, you may be better off with a Roth IRA. Unless you are a very highly paid 16 yr. old, you may not pay much in taxes. Thats the big benefit of the 401k or IRA. You get to contribute pre-tax income (you aren't taxed on that money) But, if your situation means that you get all of your withholdings back anyway, then you would be better off putting in the Roth. That way, when you take it out, you will owe no taxes on distributions. With the 401K, you would have to pay taxes on the distributions as well as a penalty for early withdrawal, if you don't keep it in until 59
2011-03-16 14:38:15
STEVEN F: You can enroll in the 401(k) at ANY time. My suggestion is NOT to enroll right away.
FIRST save up about 3 months income for an emergency fund.
SECOND begin contributing however much your employer will match.
THIRD open a ROTH IRA, and contribute enough so the total between the 401(k) and the ROTH is 15% of your income.
2011-03-16 16:10:32
2011-03-16 16:10:32